How far can Carvana slide before it sinks?

The lights remain on at Carvana, for now. Joe Raedle/Getty Images

It must have seemed like such a good idea back in 2015: a towering glass “coin operated” vending machine for cars.

That’s when Carvana’s first one was built in Nashville, Tennessee, and it was followed by 31 more as the Tempe, Arizona company, along with often wacky advertising which included a Super Bowl ad in 2022, tried to establish in the minds of consumers that buying a car could be fun at best, and at worst, less stressful.

No trudging through dealer lots, no sitting down and haggling with salespeople, no dealing with anonymous Craigslist ads. It was possible to get a deal on a good car without having to test-drive it, and Carvana would deliver it to your driveway. Even better, it would buy your trade-in and pick that up, too!

The idea took off. The company went public in 2017. In 2020, Carvana sold 244,111 vehicles, with an annual revenue of $5.587 billion, making it the second largest online used-car retailer in the U.S. By August 2021, Carvana’s often next-day delivery was available in 300-plus markets. It was one of the few companies that benefitted from the pandemic—it offered no-touch pickup and delivery.

Carvana Vending Machine masked employee key ring
Patrick T. Fallon/Bloomberg/Getty Images

Then, Carvana was hit with what Bloomberg called “a perfect storm.”

Demand for used cars “had seen a massive surge during the pandemic days, as auto production suffered from crippling supply shortages and used car prices soared. As supply chains began to normalize [in 2022], used vehicle prices have fallen sharply from their peak, squeezing margins at dealers like Carvana. Meanwhile, persistently high inflation and rising interest rates have discouraged consumers from making big purchases, especially in the face of a possible recession,” Bloomberg noted.

Just as serious is the $8 billion in debt the company is carrying as of the end of September, up from $5.8 billion at the end of 2021. Four thousand employees have been laid off.

What all this has done to the stock value is brutal. A year ago, it was $274.35 a share, down from a high of $360. Monday afternoon, on December 5, it was $7.16.

Add to that legal problems the company has had in states including Michigan, North Carolina, Illinois, and Pennsylvania. Stack on top the harmful publicity from news stories like one in Barron’s last June, titled “Carvana sought to disrupt auto sales. What it delivered were undrivable cars.” It dealt with Carvana’s repeated failure to title cars in the new owners’ names.

What, then, is to become of Carvana?

Carvana IPO CEO Ernie Garcia
Ernie Garcia (C), co-founder and CEO of Carvana, rings the opening bell during the company’s initial public offering at the New York Stock Exchange, April 28, 2017. Michael Nagle/Bloomberg/Getty Images

“Right around this time last year, I think a number of things started to break against us, and it’s definitely been much tougher sledding since then,” CEO Ernie Garcia acknowledged in a video teleconference with Automotive News last month during Used Car Week in San Diego.

Post pandemic, “We’re now back to a place where we’ve spent most of our lives, and I think, honestly, it’s a comfortable place to be,” Garcia said. “I think it’s what we’re used to, and it’s sort of easier to stay focused and build, and it’s easier to get motivated when people don’t believe in you than when people do.”

Motivation, then, should be no problem for Garcia and Carvana as the market decides the company’s fate.

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    In January ’18 I bought a ’14 Miata from Carvana. I viewed it on their website and paid the deposit. They were prepared to deliver the next day, but I scheduled the delivery a few days out. On the appointed day and time the Carvana truck appeared. I had gathered a few Miata oriented friends for the unveiling. The car was perfect, really, 24K miles and pristine, just like the dozen photos I had viewed. We took turns test driving around the neighborhood. I had the car for a week without paying for it and could return it any time. I decided to keep it, paid and received a title and plate in the mail, After that I still could return the car for 30 days. Now five years later I still have the Miata with only thing it has needed being a battery. I thought the Cavana process was terrific. Sorry to hear that isn’t working financially.

    Add another one to the stack of companies who saw life during lockdown and thought it was the future. Yeah, most sales people are clueless (or cons) but sometimes you *do* get a good one and then you’ve got something akin to an ally in a pretty crap business field.

    The sooner carvana(sic) bites the dust, the better off used car purchasers will be.
    Being a Miata enthusiast, I could never fathom why an ’09 GT and an’09 Sport, with similar mileage
    could sell for the same price. Carvana seemed to have an arbitrarily set price, usually in the area of $20k.
    Did they figure no one was smart enough to know the difference? Apparently, much like trump strategists,
    they took the public for idiots.
    If you smack a mule in the head with a 2×4 enough times, it will eventually move. will the same apply to the
    carvana customer if continually suckered? I don’t know.

    Wow, never have I ever heard of Carvana forcing anybody to buy a car from them, much less knocking them over the head with a 2×4 to force them to. Don’t like their pricing strategy? Don’t buy from them. Why knock a company for giving used car buyers an alternative? They certainly make it convenient for busy people to buy a used car, and they are upfront about what you are paying for that convenience, which is a whole lot better than I can say for some others out there.

    About a year ago, I solicited a quote from Carvana for what they would offer for my 2017 GMC Canyon.
    I paid just under $20K for the truck in 2019. They offered me almost $25K for it. I thought, how is this possible? Now I have my answer. BTW, I kept the truck and am glad that I did.

    In November of 2021 we sold a 2016 Equinox to Carvana. They paid us just shy of $5,000 more than we paid in 2016. The car went to their Jacksonville, FL and was sold for $4,000 less than they gave us. Now I am just a retired structural engineer, but something does not seem right with this business model. BTW, the car never had any issues but it was not the best purchase we ever made.

    Does anyone remember Value America? It was a dot com that used a similar sales model for computers. They’d sell them cheap, then buy them for more to fill the orders. Investors were the best and brightest of leftist capital. Employees were promised the moon and then left with worthless options, which some of them said they were taxed on when they were valued. A woman was brought in to sort out the financial mess. Her first act was to charter a jet on a same-day basis for a trip to Vegas. On New Year’s Eve. Nobody seems to want to learn the lessons of the past twenty-five years, or the past hundred and twenty-five years for that matter.

    Carvana does seem to be it’s own worst enemy. It’s an idea that should work but seems to be undone by it’s own silliness.

    Who knew a business model built on the idea that if you sell enough vehicles at a loss you could make it up in volume and it would eventually all work out . Luckily the owners were able to make themselves a tidy pile of cash .

    Let’s be honest abt carvanna:
    If your business model is to sell autos, and you only sell USED autos, you are already hamstrung
    In the greatest year EVER for used car sales, carvanna LOST $287M – think about that
    Carvanna is inthe top 5 most shorted stocks on the Street – an for good reason
    The primary “owner” of carvanna is a convicted fellon – Garcia II NEVER goes out in public, that is what Garcia III is for (as seen in the picture in the story)
    Carvanna also owns DriveTime and some other cash-burning companies
    The highest the stock ever was $274.35,not $360 – the $360 was an intraday – the lowest $3.55, today it is a $4 stock
    There are currently more than three dozen lawsuits pending on the company

    I would never buy a car without driving it and examining in person first, tooo many idiots out there, Buyer beware.

    A couple of months ago we sold Carvana a 2016 Chevy Trax in good condition with decent miles. They paid us about 85% of what we paid for the car almost 4 years earlier. I’m still trying to figure out how they will profit from this deal when they gave us ALL the money for the Trax. We couldn’t be happier with Carvana though!

    Well, I’ve always thought that these Carvana buildings would make pretty cool restaurant/nightclub multiplexes……so there’s that! Lol

    I ran into a temporary cash crunch along with an uptick in healthcare issues a year or so back. Received very positive offers on two vehicles I still had liens on. Fortunately, the crisis has largely passed and I kept the vehicles. Unfortunately, Carvana has had numerous issues with title transfers. Sadly, Carvana is NOT the only car business having title transfer issues.

    ************************************

    I still cringe at selling a high demand collector car to a well known car forum member who had been around for years. This person had a positive history and had traded these cars before. High profile person with high profile, long term employment.

    Buyer asked me to NOT transfer the title to him as he would have it done by his brother who owned a used car business in another state. No known issues to date and the car is still in his possession the last time I checked.

    Yeah, I was thinking the same thing. I surely don’t feel sorry for Ganassi (I’m a Penske fan), but I find myself feeling kinda bad for Jimmy. He looked pretty good in that blue driver suit. What’s he gonna do now?

    For over a year I was looking for a low mileage specific unicorn of a car and last October Carvana had one come available. I was able to get a full history of the car before I bought it even tracking down the original owner and got the skinny on it. I also got an offer on my BMW X3 from them at 5K more than any local dealer would give me and when I looked at the difference in price I bought and sold.

    When the vehicle arrived and I test drove it and it was as described. But when I took it to my specialist mechanic within the return period, he found a couple things that were wrong with it to the tune of about $4,000 worth of work (It also is a BMW). When I contacted Carvana’s insurance company they said get it fixed and send us the bill and I did and they paid it.

    As for the title and getting it registered in my state it did take about 2 1/2 months get done and I received 3 different temp plates from 3 different states and that worried me, but everything worked out.

    Would I buy from them again? I might, but research the car as much as you can in advance. I was lucky as I knew someone at BMW and was able to get the old records and names of the old owner and it only cost me a bottle of bourbon.

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